Options available for helping parents keep up with skyrocketing college costs

Republican file photoSpiraling college costs over the last decade have many parents concerned about being able to afford to send their children to school. In this file photo from 2010,
Thomas G. Naujoks, left, helps his daughter, Melyssa C. Naujoks, 18, move into her dorm room at Elms College

By BRIAN ROGERS Special to The Republican

It’s no secret that the cost of higher education – whether private or public, two-year or four-year – has been increasing significantly in recent years.

According to the National Center for Education Statistics, the annual cost for undergraduate tuition, room and board was about $12,804 at public colleges and universities and $32,184 at private institutions for the 2009-10 academic year. Compared to 10 years ago, costs have risen 37 percent at public institutions and 25 percent at private.

For students putting themselves through school, or the average parent with a son or daughter in college, paying the bills is becoming increasingly difficult on top of these rapidly rising costs.

Fortunately, there are several options for students and parents looking to lighten the financial burden, said Karen Henell of Pioneer Tax and Business Services in Hadley.

The Internal Revenue Service offers a variety of tax credits and deductions for students or for parents who can claim college students as dependents, Henell said.

“I don’t think people realize there are so many things that can now be deducted or used toward a tuition credit,” said Henell.

Besides offering the age-old wisdom to always keep your receipts, Henell has put together a list of tips to help reduce college expenses.

Here is a run down of the options available to students and their parents:

American Opportunity Credit: The most widely-used student tax credit that the federal government offers was introduced in 2009 along with the American Recovery and Reinvestment Act in response to the economic crisis.

The credit gives up to $2,500 per year for all four years of a student’s university study. It can also be claimed by parents who are paying for their child’s education, as long as their income doesn’t exceed $80,000 per person.

The credit is only available

for undergraduate study, but covers a wide range of expenses, including computer equipment, tutoring, Internet access, transportation, classroom supplies, in addition to direct expenses like tuition, fees and books.

Lifetime Learning Credit: Students who have used up their eligibility for the American Opportunity Tax Credit can still take advantage of the Lifetime Learning Credit, which is eligible to anyone taking full- or part-time coursework at an institution of higher learning. The credit is good for 20 percent of a student’s costs, or a maximum of $2,000.

Though the Lifetime Learning Credit is less than the American Opportunity Credit, there is no limit to the number of times you can claim it on your taxes, so it can be used to offset costs later on in life if one decides to return to school after entering the workforce. The credit is even available for students taking just one class.

Tuition and fees deduction: Students can reduce their taxable income by claiming tuition and fees deductions of up to $4,000. This deduction is available for people with higher education expenses whose modified adjusted gross income is below $80,000.

Student loan interest deductions: For students with loans, some of the interest paid on those loans may be deductible. If your income is less than $75,000, you may be able to reduce the amount of your income subject to tax by up to $2,500.